No one answered your first question, which I will do now. That flag serves two purposes. It shows your frequency in bold colors, and it acts a sort of a wind sock. Hang it at the tip of your 72 MHz TX antenna (US frequencies). What we usually do is just extend our arms to length and put this 'flag' up so it's in the wind and see what direction it (the wind) is coming from just before we take off (of course). We point the nose of the aircraft so it is oriented to face the wind for take off against the wind, or upwind.

As far as your other question is concerned, I think others have covered that pretty well.

CGr